How Zappos Used a Bold Vision to Profit from a Purpose Beyond Profit

It’s time for leaders to lift their gaze from their numbers to their purpose.

“Spreadsheets only reflect the past, not the future”
– Richard Reed, Innocent

As we emerge from the recession, business leaders will once more be thinking of revenue growth rather than cost cutting, market share rather than share price and finding the right people rather than “right sizing.” Well that’s fine then, we can put the recession behind us and resume business as usual. Well no, not really; the economic crisis and failure of banks like Lehman Brothers, the environmental crisis and criticism of major brands like BP, the explosion of social media and the emergence of brands like Twitter, Google and Facebook are creating seismic shifts in the world of business.

A different breed of organisation is emerging in this world. They succeed because they have the courage, confidence or just sheer chutzpah to pursue a purpose that is beyond profit. They engage, entertain and educate their audiences, and see their customers and employees as members of a like-minded community. They create an almost cult-like following around their brand – both within and without their organisation – and are not just different but dramatically different and who push to the extremes the consequences of their desired positioning and strategy. They have a bold vision and are committed to making it a reality.

So what characterises the approach these Bold companies take to their ‘vision’? We think it is four simple but profoundly challenging things.

Their vision is based on a clearly defined brand/customer promise

After about four years of being in business, the leaders of Zappos, the fast growing on-line retailer, asked themselves, “What do we want to be when we grow up? Do we want to be about shoes, or do we want to be about something more meaningful? And that’s when we decided we wanted the Zappos brand to be about the best customer service and the very best customer experience.” That brand promise made it possible to challenge their business model and create the success that Zappos enjoys today.

They are willing to trade short-term profit to achieve your long term vision

Having defined their purpose as providing the “very best customer service,” Zappos, then took the decision to stop its “drop-ship” business model whereby products were shipped straight from manufacturer to the consumer. This business represented 25% of sales and was the most profitable part of the business but the decision was taken because Zappos could not control the customer experience and that was their priority. Tony Hsieh CEO of Zappos said, “We’re willing to sacrifice short-term revenue and profits if it’s in the long-term interest of our brand.” So what motivated that action? The need to ensure their strategy and customer experience delivered their brand promise. And that takes us to our next point.

They align the strategy, the brand, and the customer experience so that they are inseparable

Harvard Business Review research found that those companies whose customers believed had become more differentiated realized a stock-gain of 4.8% on the year whereas those that were considered less-differentiated saw a loss of 4.3% over the same period. One brand that has done this brilliantly is the Geek Squad, the technology support company. The brand has gone to enormous lengths to ensure that the customer experience, the brand and the strategy operate together to create a highly distinctive offer. Roberts Stephens the founder says “This is where companies go wrong; they don’t take a bold enough point of view. That’s what brands are for, to make you distinct from other entities.”

They always use vision as their “compass”

It is probably true to say that most organisations starts off with a purpose—a vision or mission, an idea that drives them. However it is also true that as many organisations get bigger, the sense of purpose gets lost – trodden down by financial metrics which begin to drive the organisation instead. One organisation that has focused on its vision for the brand is Burberry.

During the recent recession the luxury retail market declined by 30% yet Burberry continued to grow and recently announced a 50% year on year profit for the first half of 2010. It achieved this result by not letting go of the vision for the brand. As Angela Ahrendts, CEO of Burberry says; “There is always this balance between hard and soft strategies, investment and intuition, but if you have a greater purpose, it becomes relatively easy to make those calls.”

Seafarers have known through the ages that the way to navigate through dangerous waters is to have a clear course to steer-one that leads to the ultimate destination whilst avoiding immediate hazards. Unless organisations have this same clarity of purpose they will be find themselves continually tossed about in the continuing turbulence ahead. The point that Richard Reed was making is that we cannot navigate our business through spreadsheets that are essentially records of where we have been-we also need a compass to know where we are headed too. That compass is our purpose.

© Shaun Smith and Andy Milligan. Bold-how to be brave in business and win. Kogan Page. 2010

You can download the free ‘Bold-how to be brave in business and win’ iPad app from the Apple Store to compare your own organization with the bold brands. To see a video of the app being used go to www.boldthebook.com.

Shaun Smith is founder and partner at smith+co the customer experience specialists. Andy Milligan is an international consultant on brand and business culture.